Here is what you need to do. Open a new checking and savings account. No not obligate yourself on a new car or any large purchases. Do not fall into any type of credit repair schemes, as they are schemes to get your money. There is no such thing as credit repair. There is establishing credit and that is what I want to show you. If you follow my suggestions, in 3 - 4 months you can be ready again with decent credit to qualify for the best mortgage.
1. Open two suggested accounts, one checking and one savings. Start putting away some savings each month, the more the better.
2. Meet with a person in your new bank and confide in them that you are wanting to re-establish your credit. Ask for a $3,000 loan secured by $3,000. The deposit will come from the loan proceeds and have them deduct their payments from the secured savings account. Make sure both you and your spouse's names are on the loan.
3. Find a close relative or good friend that has excellent credit. Explain that you need to re-establish your credit to buy a new home. Ask them to add your name to their credit card account, however you do not want the card nor have any access to their account. When you are added, make sure your name and social security number are included. Your credit will show a payment each month. You are actually piggy backing their credit and your poor creditWill Not affect their credit, but their account will appear on your credit report as being yours and you get the credit of their good payment history. Beware, do not do this with someone with so so credit that is late in paying as that will give you bad credit.
4. Pay all new bills early and stay clean, avoid borrowing money to make purchases as you will fall into high interest situations. Stay clean and do not bounce any checks.
5. Visit your local bank and obtain a secured VISA Card. Deposit $250.00 as security and obtain a $250.00 credit limit on your card. Do not get a pre-paid card but get a secured VISA. Every month charge only $20- $25.00 and pay the bill as soon as you receive it each month. Do not use the money securing the card for payment, but use fresh money to pay the bill.
This as well as the above steps will put good trade lines on your credit report. The idea behind the secured VISA is that it shows 1) Good Payment History 2) that you can handle credit properly.
If you can do these simple steps as soon as possible, I guarantee you we can get you a goodmortgage at better rates than are now available with poor creditscores.
What you are doing is preparing yourself for a goodmortgage as lenders look favorably at good recent credit. Good recent credit overpowers old bad credit histories.
Why getting the lowdown on loans is in your best interest
You've seen it in TV commercials. You've heard it in radio ads. You've read it in advertisements in the Sunday paper. It's a message that always gets your attention: COME IN TODAY FOR 0% INTEREST. So, like all smart consumers looking for a good deal, you hurry in and that's when the salesperson breaks it to you: "Sure, you can get the 0% rate...if you qualify." At this point, many of us break into a cold sweat, cross our fingers and do a loan dance.
Why go through all of that? Instead, you can know exactly where you stand before you go to make any big purchase, whether it's a plasma TV...new car...bedroom set...even a new house. Knowing your credit status makes the buying process a lot less stressful (and nobody has to see you dance).
So before you step foot in a store, car lot or bank, you should be prepared. The first step is understanding the big three factors that can affect your loan.
Meet the big three: 1. Your credit score 2. Debt-to-income ratio 3. Loan-to-value ratio
All of these factors may be used to determine if you qualify for a loan, and if you're eligible for any special financing offers. By improving these three factors, you can get lower rates and save thousands on your loan (that's right, thousands).
Let's start with your credit score. The score you want to aim for is 650 and above. Check your score and if you're not quite there, focus your efforts on paying bills on time, reducing your revolving debt balances to below 35% of their limits, avoiding new inquiries and clearing negative inaccuracies from your credit report. It is possible to improve your credit score quite a bit over a few months.
Next up is the debt-to-income ratio. This is a number used to help define your financial stability. To calculate your debt-to-income ratio, simply add up your monthly debts and divide by your monthly income. For example, if you make $1,000 a month and pay $250 in monthly bills, your debt-to-income ratio is 25%. A debt-to-income ratio of 20-30% is usually considered good. Again, if you're not yet in this range, there are ways to improve your debt-to-income ratio.
Last but not least: your loan-to-value ratio. When you're going after a larger loan, like a mortgage, this ratio is used to see how much you can afford to borrow. It's calculated by dividing the loan amount by the property's value. So if you want to buy a home worth $200,000 and need a $120,000 loan, your loan-to-value ratio would be 60%. Ideally, your ratio should be less than 80%—anything above that may increase your interest rates by quite a bit. Doing things like finding a less expensive home or saving up for a larger down payment can help you improve your loan-to-value ratio.
You may be thinking "wow, that's a lot of math." But once you understand the factors that go into loan approval, the money you'll save on interest rates can really add up. You'll see, it always pays to be prepared!
Need to add a few points to your credit score?
Here's how to do it:
• Pay on time, every time—late payments of any kind can have a negative effect on your credit score. Marking your calendar or signing up for automatic payment can help you meet your due dates.
• Clean it up—check your credit report regularly and remove any inaccuracies.
• Know your limit—try to keep your credit balances below 35% of your available revolving credit limits.
• Don't go crazy with credit—the fewer times you apply for new credit, the better.
• Give it time—once you establish a history of good credit behavior, your credit score will steadily go up. Good Luck
Feel free to call and ask questions. We are here to help you.
Here is an interesting article regarding credit bureaus to read about what has actually happened to many individuals and how it is best to handle such situations
Battling the Credit Bureaus
by Aleksandra Todorova
August 30, 2006
AS THE DIRECTOR of finance at a Brooksville,
Fla. , auto dealership, Marvin Hendrick, 52, reviews consumer credit reports on a daily basis to determine his customers' auto loan rates. So it was a sore day back in 2004 when, amid scores of 0% APR financing promotions, he had to grant himself a car loan at a whopping 13.74%.
He didn't have a choice. Because of a serious mistake in his credit report, Hendrick's credit score was 445 out of a possible 850: a score low enough that most lenders would refuse to grant him any credit at all. "I had to pull strings with the banks I'm associated with to get myself a car loan," he explains.
The culprit: a tax lien that Experian, one of the three major credit reporting bureaus, incorrectly listed as unpaid. Over a three-year period, Hendrick disputed the error numerous times, sending the bureau the IRS-issued certificate of discharge. He also pointed out that the fact that he sold his house in 2002 was proof that the tax lien, which was attached to the mortgage, had been satisfied. "It's kind of a no-brainer," he says. "When you sell a piece of property, you have to satisfy any liens or judgments on it." Much to his frustration, Experian continued to list the lien as unpaid, citing courthouse documents. (He found out that the certificate of discharge never made its way to the public record, so his file wasn't updated.)
Two-Digit Codes When it comes to disputing errors in your credit report, "no-brainers" don't matter: The process is entirely automated. In fact, consumers are often forced to take the credit bureaus to court so they can have their case heard by a human being, explains Evan Hendricks, author of "Credit Scores and Credit Reports." "It gets very frustrating when people have genuine disputes and do everything they're supposed to do and can't do anything to correct it," he says.
Here's how it works: When consumers file a dispute with the credit bureau, they are asked to describe the error, and can opt to send any supporting paperwork or information separately. The bureaus then conduct an investigation, which basically involves notifying the creditor about the disputed information so the creditor can confirm whether it's wrong. Problem is, the bureaus report errors by choosing from a list of two-digit codes that describe the most common types of complaints, such as "account not his/hers" or "claims account closed." That, consumer advocates say, may solve some problems. But it doesn't solve those that fall outside the box.
"They try to automate things to make it cheaper, but in the process they lose a lot of detail," says Chi Chi Wu, staff attorney,
National
Consumer
Law
Center . "People send these long letters that explain what happens, a lot of documentation, and all of that gets reduced to two-digit codes which the agency sends to the lender, the furnisher of the information." (A TransUnion spokesman says its practice is to scan the documents and include a link in the consumer's credit file, so it can be accessible to the creditors who pull the consumer's file, while Experian said it copies and mails the supporting documentation to the creditor. Equifax did not return our calls for comment.)
Unable to get erroneous information out of your report? Here's what you can do:
1. Take it to the source. While disputing with the credit bureaus, contact the creditor responsible for the error directly, as well. Send all supporting documentation to make sure they get more than the two-digit code. But keep in mind: According to the FACT Act, consumers do not have legal recourse against creditors. 2. Complain. Under the FACT Act, the FTC is required to transmit complaints to the three major credit bureaus. Send a copy to your state's Attorney General's office, as well. 3. Keep a paper trail. Send all correspondence certified mail, return receipt requested and keep copies of everything. 4. Get legal help. Most lawyers typically require that consumers have tried to resolve the issue with the credit bureaus directly. For help finding a lawyer, check the National Association of Consumer Advocates (NACA) web site. For more information on lawsuits, go to MyFairCredit.com, a web site created by a group of attorneys who specialize in credit-related litigation.
Even the data furnishers — the creditors themselves — aren't entirely happy with the two-digit code system. In a report issued by the Federal Trade Commission earlier this month, the Coalition to Implement the FACT Act, which represents financial-services companies, reported to the FTC about 30% to 40% of disputes are, in fact, assigned a generic code such as "other" or "consumer complains data inaccurate; no specific dispute," which makes investigations time-consuming and costly. The Coalition recommended that more specific codes be used.
The credit bureaus, on their part, say the automation has increased the speed by which some problems can be resolved. But "for the subgroup of people for whom it doesn't work, it causes great harm," says Rob Treinen, an attorney with Feferman & Warren in
Albuquerque, N.M.
Hendrick, the finance director, says it took complaining to the FTC and the Florida Attorney General's office to get his problem heard. Eventually, "someone really, really high up [at Experian] actually took the time to listen to me," he says. Since the error was corrected in December 2005, his credit score has increased to 677, his new car loan carries a favorable 6.24%, and in March he bought a new house with a 6.5% mortgage.
Growing lawsuits While there aren't any statistics on the number of lawsuits filed against the credit bureaus, consumer litigation attorneys say it's growing exponentially. "We frankly have more work than any of us can handle here," says Leonard Bennett, an attorney with Consumer Litigation Associates in
Newport News, Va. , who specializes in Fair Credit Reporting Act (FCRA) litigation. "As the [dispute] system has become entirely automated, that has spurred more litigation and it continues to grow every day."
Credit report errors are much too common. According to a 2004 study by the Public Interest Research Groups — the latest available — as many as 79% of credit reports have errors, 25% of which are serious enough to potentially result in a credit denial. As more consumers take advantage of free annual credit reports and become educated about the effect of a low credit score on their lives, Treinen says, the number of disputes will likely continue to increase. "The credit agencies just need to spend a little more time and money to make real investigations," he says.
Inconclusive evidence The FTC doesn't think so. In its report, it says the evidence presented by consumer advocates is "inconclusive" and recommends that no legislative action be taken for the time being to change the process. That's better than nothing, according to Bennett. "The FTC didn't say there is no problem," he says. "They implicitly acknowledged there's a problem, but said, let's take some time and see if FACTA can fix it." (FACTA, a common name for the FACT Act, is an amendment to the Fair Credit Reporting Act that, among other things, requires the credit bureaus to "conduct a reasonable reinvestigation" of disputed information to determine if it is inaccurate.)
This is little consolation 33-year-old Samantha Murphy of
Blackwood, N.J. , who is suing Experian for reporting six negative accounts that are not hers. When American Express pulled her report in a routine account review, they decided to cut her credit limits in half, bringing her to 100% of credit utilization on one of her AmEx cards. When the change is reported to the bureaus, her credit score will drop and likely cause her other creditors to hike their interest rates. With a seven-week-old baby, that's the last thing Murphy needs. And although she sent the court documents to American Express, along with copies of her Equifax and TransUnion reports that show no fraudulent accounts, "[AmEx] said they were going with Experian and 'to us, that's the true stuff,'" Murphy says. (American Express does not comment on individual cases, but a company spokeswoman confirmed: "Once a cardmember works with the bureau to correct any inaccuracies and we receive a corrected version, we are able to re-evaluate any decisions that may have been impacted by erroneous information.")
As someone who grants consumer credit, Hendrick grudgingly agrees. "In the credit reporting world, if it's on your credit report and it's bad, you're guilty until you prove yourself innocent," he says. "I know it because I deal with it every day, and I give credit to people based on their credit file. And to me, if it's in there, it's the truth."
Easy Steps to Increase Credit Ratings
If you need to increase credit ratings in order to apply for a loan or mortgage, there are several things you can do. First, understand that there is no quick fix to your credit problems. Think about how you got into credit difficulties in the first place. Chances are, unless you are the victim of identity theft, you spent years building a poor credit history. The bad news is that you cannot raise credit rating information overnight. Just as it took time to lower your credit score, it will take time to improve it as well. The good news is that you will not have to spend as much time working at it as you did lowering it, if you are disciplined and make the necessary changes to your spending habits right away.
Individuals are not the only ones who need to be concerned with their credit ratings. Agencies such as Standard and Poor report the financial conditions of various companies to their potential investors. Standard and Poor's credit ratings are a good indication of the financial health of a particular business. Like individuals, if your business is suffering from pore credit, you need to take steps to raise credit rating numbers so that your business will be more appealing to investors. These steps involve becoming current on any debts or bonds that are in default, working hard to make a profit, and proving that your company is financially stable.
If you are an individual, not a corporation, there are many steps you can take to increase credit rating numbers. Start the process of fixing your credit by getting a free copy of your credit report from each of the three agencies that report consumer credit information. Check this report carefully to make sure that it is accurate. Fixing any errors you find raises credit rating scores almost instantly.
If there are no errors on your credit rating, or you have fixed any errors that you found, the next step to increasing your credit is implement good budget habits. Good budget habits allow you to pay your bills when they are due each and every time. Not paying your bills on time is the most important negative factor on your credit history. Once you have your plan in place that allows you to pay your bills on time every month, start working on paying off the debts you have.
One good strategy to use is to pay off the debt with the smallest balance first. This way you will be able to see success quickly and be motivated to continue on your plan to pay off your debts. However, if you are in serious financial straits and need to increase your credit quickly, you need to use a different strategy. Start paying down your debts until each debt is less than half of the maximum borrowing limit on that card or loan, rather than paying the smallest balance off first. This does not eliminate loans or credit cards, but it raises credit rating numbers. In fact, this strategy will increase credit ratings quickly, allowing you to get the loans, mortgages, or credit cards you need.
